Demystifying the Agreement of Purchase and Sale–Title Search Clause #10

Today’s topic is on the Title Search Clause in the Agreement of Purchase and Sale. This is one of the most important “standard” clauses in the agreement. What most don’t understand, or over look, is that this is a conditional clause.

Real estate professionals are not lawyers. Our title search tools are limited, we rely on information provided by the sellers and support from Municipal and County resources, however, these resources are not infallible. Only a lawyer can confirm absolute title to a property. The Title Search Clause provides a safety net for both Buyer and Seller by allowing a search of a property to ensure title can indeed be exchanged as described in the Agreement.

The Title Search Clause allows for the Buyer’s lawyer, at the Buyer’s expense, to undertake this task prior to the date set out in clause #8 (more on clause #8 in another Blog). This is an added cost to the Buyer and is usually incorporated in closing costs from the lawyer. However, it is important to point out, that just like any other condition, at the Buyer’s expense, whether the deal closes or not, the Buyer will be absorbing this cost. (I will have more details on “Conditional Clauses” in future Blogs.)

There are a whole host of things that a Buyer’s lawyer is looking for to satisfy this condition, I’m rewording them, here, in layman’s terms.

1. The title to the property must be good and free of any registered restrictions, charges, liens and encumbrances (there are a number of exceptions to this which I have listed below)

2. There must be no valid objection to title,

3. There must be no outstanding work order(s)

4. There must be no deficiency notice(s)

5. The buyer must be able to lawfully continue the present use

6. The principal building must be insurable against risk of fire

Each one of these unto themselves can be a full topic of discussion…in any case, for any doubt you should always seek legal advise.

If any of these issues are uncovered, it then becomes the responsibility of the Seller to remedy (fix) the problem(s), at the Seller’s expense. One of the remedies is that the Seller may obtain Tittle insurance in favour of the Buyer (or any mortgagee). It is important to note that any and all issues uncovered can re-open negotiations if both Seller and Buyer are willing.

If the Seller is unable or unwilling to remove, remedy or satisfy (the Buyer/Buyer’s lawyer) and the Buyer is unwilling to Waive this condition, the deal dies. Any deposit money will be returned to the buyer without deduction.

By virtue of this clause, the Seller, Listing Brokerage and Co-operating Brokerage shall not be liable for any costs or damages…Buyer’s you must be made aware of this!

The clause finally concludes that if there is no valid objection to title the Buyer accepts possession of the property as outlined in the Agreement…there is no further document required to fulfill this clause (except for what a lawyer may request to complete the transaction).

Here is the actual clause:

Here are all the exceptions to the restrictions, charges, liens and encumbrances as per point #1 above…both Seller and Buyer need to be aware of these:

1. Unless it is otherwise agreed upon in the Agreement by both parties

2. Any registered restrictions or covenants that run with the land and are complied with

3. Any registered Municipal agreements and registered agreements with public utilities, and are complied with

4. Any minor easements for supply of domestic utility or telephone service to the property or adjacent properties.

5. Any easements for drainage, storm or sanitary sewers public utility lines, telephone lines, cable tv lines or other services which do not materially affect the property.

Again, if in doubt about these exceptions always check with your lawyer.

There’s a lot to this clause and it is often just glanced over in the signing process. ALWAYS READ AND UNDERSTAND WHAT YOU ARE SIGNING. If in doubt…ask for clarification and/or seek legal advise.

Don’t forget to send your comments, stories, or ideas, in the comment section below or via email at dimaline@amtelecom.net.

Watch for my next Blog on….

Demystifying the Agreement of Purchase and Sale-Title Search Clause #8

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Kathy Dimaline is a Real Estate Broker for RE/MAX Grey Bruce Realty Inc. The comments on this Blog are the opinions, only, of Kathy Dimaline and do not constitute any legal advice or legal opinion and does not represent the interests or opinions of RE/MAX Grey Bruce Realty Inc., brokerage.